HUD Releases Preview of Proposed HOME Investment Partnerships Program Rulemaking

On May 15, the U.S. Department of Housing and Urban Development’s Office of Community Planning and Development (CPD) released a preview of a proposed rule to be published soon in the Federal Register making changes to the HOME Investment Partnerships Program regulations. The proposed rule, if finalized, would represent the most significant regulatory update to the HOME program since the 2013 final HOME rule. Once the proposed rule is published in the Federal Register, interested parties will have 60 days to file comments, with a final rule expected to be issued later in the fall.

The proposed rule is intended to simplify HOME requirements and better align the program with the Housing Credit and other HUD programs, including by complying with new Housing Opportunity Through Modernization Act and National Standards for the Physical Inspection of Real Estate (NSPIRE) rules; improve HOME Tenant-Based Rental Assistance (TBRA); modernize HOME homeownership requirements; simplify qualification requirements for Community Housing Development Organizations (CHDOs); establish new tenant protections; and make other changes to strengthen the program and maximize its production capacity. Many of the changes address issues NCSHA has raised with HUD over many years.

Highlights of the rule that are likely to be important to state housing finance agencies follow.

• Allows additional flexibility in CHDO board composition, demonstrated capacity requirements, and project ownership, sponsorship, or development rules. Under current law, at least one-third of CHDO board members must be representatives from the low-income community and no more than one-third of the board may be made up of public officials. The proposed rule would broaden who can count towards the minimum low-income board representation and narrow who counts against the limit on public officials. The rule also would permit the expertise of certain CHDO board members and other officials to count towards satisfying the demonstrated capacity requirement, even if those individuals are volunteers, and allow CHDOs to share certain responsibilities with other organizations. Lastly, it would eliminate the requirement that rental housing developed or sponsored by a CHDO continue to be owned by a CHDO throughout the period of affordability in cases in which a CHDO needs to transfer ownership of the property to another entity.
• Provides that participating jurisdictions (PJs) could accept NSPIRE inspections of rehabilitation projects performed for other funding sources in the capital stack in lieu of the PJ’s final inspection at completion of rehabilitation and ongoing periodic inspections during project operations. Additionally, for small rental projects (one to four units), the proposed rule would allow the use of either state and local standards or a streamlined list of NSPIRE inspectable items for periodic inspections and would allow PJs to accept NSPIRE inspections for HOME-funded TBRA.
• Aligns HOME rent limit requirements with changes made to the Section 8 program by the Housing and Economic Recovery Act of 2008 by allowing a project owner to receive the full Housing Choice Voucher rent determined by a public housing authority (PHA) or rent under another federal or state rental assistance program in cases when the PHA rent allowance exceeds the HOME rent, regardless of whether the HOME units are high- or low-HOME units. This would reflect the approach already in use in the Housing Credit program and could provide additional rental income for properties, which could help address operating needs.
• Allows HUD to provide higher maximum per-unit subsidy limits for properties in high-cost areas by increasing the cap on those limits from 240 to 270 percent. It also would allow for a further five percent increase in per-unit subsidy limits for new construction of HOME units that adhere to certain green and resilient building standards.
• Improves many of the rules related to using HOME to assist home buyers. For example, the rule would extend the deadline by which a unit produced for owner occupancy must be sold to a HOME-eligible buyer, establish examples of resale formulas on which PJs could rely if imposing resale restrictions rather than recapture restrictions, and eliminate the requirement that a property must meet HOME property standards before HOME down payment assistance may be used to purchase the property so long as there is a plan to bring the property into alignment with those standards after purchase.

The rule includes numerous other changes and technical fixes. Interested stakeholders are encouraged to review the entire proposed rule and submit comments once it is published in the Federal Register. To provide feedback to help inform NCSHA’s comments, please email Robert Henson by June 28.